Tri Pointe Homes(US:TPH)2021-02-18 19:00Financial Data and Key Metrics Changes - TRI Pointe Homes reported a net income of $115 million or $0.92 per diluted share for Q4 2020, with a year-over-year homebuilding gross margin expansion of 130 basis points to 23.2% [7][25] - The company experienced a 14% growth in net new orders and a 69% increase in unit backlog [7][32] - For the full year 2020, the company generated $588 million in positive cash flow from operations and ended the year with over $1 billion in liquidity [28] Business Line Data and Key Metrics Changes - The absorption rate for homes was four homes per community per month in Q4 2020, representing a 38% increase compared to the prior year [22] - The average selling price for homes delivered in Q4 2020 was $640,000, with expectations for a decrease to approximately $600,000 in 2021 and $550,000 in 2022 [24] - The gross margins outside of California exceeded 20% in Q4 2020, with pre-tax income increasing by 88% compared to the prior year [26] Market Data and Key Metrics Changes - The company noted that 60% of its customers in 2020 were first-time home buyers, with millennials making up 50% of deliveries processed through TRI Pointe Connect [9] - The company anticipates opening approximately 160 new communities over the next eight quarters, starting with 112 active selling communities [23] Company Strategy and Development Direction - TRI Pointe Homes is focusing on improving return on equity through strategic initiatives such as increasing scale and margin contribution from early-stage divisions and enhancing operational efficiencies [11] - The company has formalized its move to operate nationally as one unified brand, TRI Pointe Homes, to concentrate sales and marketing efforts [10] - The company aims to control 40% of its lots through option agreements, having increased its option percentage to 37% by the end of 2020 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2021, citing favorable market conditions such as limited housing supply and low mortgage rates [10] - The company expects to deliver between 5,700 and 6,000 homes in 2021, with a gross margin forecast of 21% to 22% [30] - Management highlighted the importance of adapting to the pandemic and the strong demand for home ownership, particularly among first-time buyers [8][9] Other Important Information - The company repurchased over 15 million shares in 2020, reducing the year-end share count by approximately 10% [19] - TRI Pointe Homes plans to open 22 new communities in Q1 2021 and expects to end the quarter with between 120 and 125 active selling communities [23][29] Q&A Session Summary Question: Pricing environment and gross margin guidance - Management noted that price increases ranged from 6% to 12% in 2020, with cost increases expected to be 8% to 12% in 2021 [38] Question: Mortgage market and buyer behavior - Buyers are eager to lock in rates, understanding the current environment and delivery timelines [41] Question: Order growth expectations for 2021 - Management indicated that order growth may be flat to down due to lower community counts, but they remain optimistic about the spring selling season [80] Question: Impact of Texas weather events on closings - Management is assessing the situation but noted significant weather events could impact delivery timelines [75] Question: Out-of-state buyer trends - There has been an increase in out-of-state buyers in certain markets, but local supply and demand conditions primarily drive pricing [104]